Tax in Singapore

A person is subject to tax on employment income for services performed in Singapore, regardless of whether the remuneration is paid in or outside Singapore. Resident individuals who derive income from sources outside Singapore are not subject to tax on such income. This exemption does not apply if the foreign-source income is received through a partnership in Singapore. Foreign-source dividend income, foreign branch profits and foreign-source service income received by any individual resident in Singapore through partnerships may be exempted from Singapore tax if certain prescribed conditions are met.

Individuals who carry on a trade, business, profession or vocation in Singapore are taxed on their profits. Whether an individual is carrying on a trade is determined based on the circumstances of each case. Foreign-source income received in Singapore by a non-resident is specifically exempt from tax.

Individuals are resident for tax purposes if, in the year preceding the assessment year, they reside in Singapore except for such temporary absences from Singapore as may be reasonable and not inconsistent with a claim by such persons to be resident in Singapore. This also includes those who are physically present or who exercise employment other than as a director of a company in Singapore for at least 183 days during the year preceding the assessment year.

A concession is available for foreign employees whose employment period straddles two calendar years. Under this concession, which is commonly known as the “two-year administrative concession”, the individual is considered resident for both years if they stay or work in Singapore for a continuous period of at least 183 days straddling the two years, even if fewer than 183 days were spent in Singapore in each year.

Non-resident individuals employed for not more than 60 days in a calendar year in Singapore are exempt from tax on their employment income derived from Singapore. This exemption does not apply to a director of a company, a public entertainer or a professional in Singapore.

Under the Not Ordinarily Resident (NOR) scheme, a qualifying individual may enjoy tax concessions for five consecutive assessment years, including time apportionment of Singapore employment income, if certain conditions are satisfied.

Employment income - Taxable employment income includes cash remuneration, wages, salary, leave pay, directors’ fees, commissions, bonuses, gratuities, perquisites, gains received from employee share plans and allowances received as compensation for services. Benefits-in-kind derived from employment, including home-leave passage, employer-provided housing, employer-provided automobiles and children’s school fees, are also taxable. Certain types of these benefits receive special tax treatment.

Under the NOR scheme, a resident employee whose resident status is not accorded under the two-year administrative concession (see Who is liable) may benefit from the following concessions for five consecutive assessment years:

• Time apportionment of employment income
• Tax exemption (with certain exceptions) for the employer’s contributions to non-mandatory overseas pension funds or social security schemes, subject to the CPF maximum contribution limits for “ordinary” and “additional” wages

The NOR scheme has since ceased and the last NOR status granted is from the 2020 assessment year to the 2024 assessment year. Individuals who have been accorded the NOR status will continue to enjoy NOR tax concessions until their NOR status expires if they continue to meet the conditions of the concessions.

To qualify for the NOR scheme, an employee must meet the following conditions:

• He or she must be a resident for tax purposes in the assessment year in which they wish to apply.
• He or she must not have been a resident for tax purposes in the three assessment years immediately preceding the assessment year in which he or she wishes to apply.

To benefit from the time apportionment of employment income, the employee must meet the following additional conditions:

• He or she must spend at least 90 business days in the calendar year outside Singapore with respect to his or her Singapore employment.
• The employment income of the individual must be at least SGD160,000.
• The tax on the apportioned income must be at least 10% of the total Singapore employment income.

The time apportionment concession applies to both cash compensation and benefits-in-kind, other than directors’ fees and Singapore tax paid by employers.

Self-employment and business income - Self-employment income subject to tax is based on financial accounts prepared under generally accepted accounting principles. Adjustments are made to the profits or losses according to tax law. Business income is aggregated with other types of income to determine taxable income.

Income from a trade, business, profession or vocation paid to a non-resident is taxed at 22%.

Income from professional services paid to a non-resident is taxed at 15%. This is a final withholding tax on the gross amount, unless the non-resident professional elects to be assessed at a rate of 22% on net income.

From the 2024 assessment year, the income tax rate for non-resident taxpayers (except on employment income and certain income taxable at reduced withholding rates) will be increased from 22% to 24%.

Losses and excess capital allowances from the carrying on of a trade, business, profession or vocation may be offset against all other chargeable income of the same year. Any unused trade losses and capital allowances can be carried forward indefinitely for offset against future income from all sources, subject to certain conditions.

Relief is also available for the carry back of current year unused capital allowances and trade losses, subject to the satisfaction of certain conditions.

Investment income - Under the one-tier system, dividends paid by Singapore tax-resident companies are exempt from income tax in the hands of shareholders, regardless of whether the dividends are paid out of taxed income or tax-free gains.

Dividends, other than tax-exempt and one-tier dividends, are taxed at the applicable income tax rates.

Singapore-source investment income (that is, income that is not considered to be gains or profits from a trade, business or profession) derived directly by individuals from specified financial instruments, including standard savings, current and fixed deposits, is exempt from tax. Examples of such income include interest from debt securities, annuities and distributions from unit trusts.

Interest (excluding tax-exempt interest from approved banks, finance companies, qualifying debt securities and qualified project debt securities) paid to non-residents is taxed at 15%.

Royalties for the use of, or right to use, movable property and scientific, technical, industrial or commercial knowledge or information paid to non-residents are taxed at 10%.

Net rental income is aggregated with other types of income and taxed at the applicable rates.

Rent or other payments for the use of movable property paid to non-residents is taxable at 15%.

Taxation of employer-provided stock options and share ownership plans - Employer-provided stock options are taxed at the time of exercise, not at the time of grant. Share awards are taxable at the time of award or at the time of vesting, if a vesting period is imposed. The taxable amount is the open market value of the shares at the time of exercise, award or vesting, less the amount paid by the employee, if any.

Stock options and share awards granted during overseas employment are not subject to tax even if the gains derived are remitted into Singapore while the employee is a tax resident, because all foreign-source income received in Singapore (other than through partnerships) by resident individuals is exempt from tax. Stock options and share awards granted on or after 1 January 2003 while the employee is engaged in employment in Singapore are subject to tax, regardless of where the options are exercised or shares are vested. These options and awards are deemed exercised or vested at the time of cessation of employment (including being seconded outside Singapore for an assignment or leaving Singapore for a period more than three months) for a foreign national employee, and tax is due immediately on the deemed gains.

Singapore does not impose tax on capital gains. However, in certain circumstances, the tax authorities consider transactions involving the acquisition and disposal of real estate, stocks or shares to be the carrying on of a trade. As a result, gains arising from such transactions are taxable. The determination of whether such gains are taxable is based on a consideration of the facts and circumstances of each case.

The buyer of property must pay stamp duty on the value of the property purchased. Certain buyers of residential properties (including residential land) must pay additional buyer’s stamp duty, in addition to the usual stamp duty. Sellers of residential and industrial properties may be liable for seller’s stamp duty depending on when the property was purchased and the holding period. Specified sellers of industrial properties may be liable for stamp duty.

Estate duty has been eliminated from the Singapore tax regime for deaths occurring on or after 15 February 2008.

Singapore does not impose a gift tax.

The Central Provident Fund (CPF) is a statutory savings scheme to provide for employees’ old-age retirement in Singapore. Only Singapore citizens and permanent residents working in Singapore are required to contribute to the CPF. All foreigners (including Malaysians) are exempt from CPF contributions. Foreigners may not make voluntary contributions to the CPF.

Both employees and employers must contribute to the fund. For individuals up to 55 years of age, the statutory rate of the employee’s contribution is 20%, and the rate of the employer’s contribution is 17%. Lower contribution rates apply to individuals over 55 years of age. Special transitional contribution rates apply to foreigners who become Singapore permanent residents.

Self-employed individuals who carry on a trade, business, profession or vocation may also participate in the CPF scheme.

A Supplementary Retirement Scheme (SRS) allows Singapore citizens and permanent residents to elect to contribute to private funds in addition to their CPF contributions. Foreigners working in Singapore may also participate in the scheme. Contributions are deductible but are subject to a cap.

An individual may pay the tax due for the assessment year in one lump sum within one month after the issuance of a tax assessment. Alternatively, the tax may be paid in instalments, up to a maximum of 12 per year.

Relief from double taxation is granted on income derived from professional, consultancy and other services rendered in countries that do not have double tax treaties with Singapore.

Double tax relief is also available for foreign taxes levied on income taxed in Singapore if Singapore has a tax treaty with the country concerned and if the individual is resident in Singapore for tax purposes.

Singapore has entered into tax treaties with 99 countries.

Individuals who receive employment income in Singapore and who are tax residents of countries that have concluded double tax treaties with Singapore may be exempt from Singapore income tax if their period of employment in Singapore does not exceed a certain number of days (usually 183) in a calendar year or within a 12-month period and if they satisfy certain additional criteria specified in the treaties.